eToro Makes Forex Trade Child's Play
techcrunch.com
techcrunch.com
I think when the US gov starts stomping harder on gambling companies that it deems illegal (which it already has to a degree - even with bad repercussions from the WTC), we'll see what happens with this company
Far from stupid, I'd say this is actually quite clever. What's more, it's no less moral than betting on fantasy football.
I think all of those people are going to keep looking and not even blink an eye at this. When you're betting on which currency goes up or down during a one hour period, there is not even the feeling that skill is involved, online sports betting and poker and fantasy sports.
I just don't think there is a market of people that would prefer to gamble on racing currencies instead of sports. Who is this market? People that have always wanted to day trade but have never tried?
Well, the 'skill' in BJ is pretty thin, it's thinner in craps, almost nonexistent in roulette (if I recall correctly, all bets are equivalent in EV, except for one, which is worse), and completely absent in lotteries and numbers. And that's not to mention "Casino War". People will create their own feeling of skill based on magical thinking. After all, none of those games seem to be lacking for players.
I think this is brilliant; forex outcomes are basically random (yes, they are - if you could predict them, you'd be too busy counting your yachts to be here) so this system uses them as a RNG for games of chance.
Which people love. Wish I'd thought of it.
http://www.techcrunch.com/2007/10/24/worlds-worst-email-app-...
The visual representation of data, huh. These people must make Edward Tufte cry.
Edit: The reason conventional trading software is complicated is because traders want every tool and advantage they can get if it's their own money they're risking (they also probably like the illusion that they're making rational decisions). I don't get this little PlaySkool dealie that made TechCrunch.
The way I read the site, it's basically acting as a gambling site, giving minigames that people can bet on, and luring the gambling crowd into the game, but they're using a loophole in the US rules against gambling.
It reminds me a little of DraftMix in that way.
I agree with your assertion that skill probably has little or no effect on that game in the short run (and hell, maybe not even in the long) but people tend to credit skill wherever they win and luck wherever they lose. Anything with sufficient volatility will satisfy people's desire for both.
That said, I don't think they're in the same market we are, and I don't think they'll be too successful. Forex is far too esoteric for the common man, even with nice little animations of foot races, and probably too unpredictable for most of the rest. I don't know how many people read The Economist, but their target audience is some subset of that.
The fishy part is them leaving off bid/ask spreads off the site. Couldn't find them while taking a quick glance.
They also use 400:1 leverage meaning for $25 you can trade $10000. You're wiped out in a 0.25% price move. Looking at the yen today http://finance.yahoo.com/q/bc?s=USDJPY=X&t=1d long or short anyone would be wiped out with that kind of margin.
(As to the term 'gambling', I think people are using the broad definition by which day-trading and other such financial transactions are termed a 'gamble' rather than a 'very risky, poorly informed financial investment on such a short time-scale that one can't possibly make informed predictions of price movement'. Similarly, I believe that poker is often legal because it's a 'game of skill', but that doesn't mean it's not also a gamble.)
I remember reading something in Jack Schwager's Trading Wizards book where someone talked about successful hedge funds not using more than 5-10x leverage.
Leverage doesn't mean much if you don't know the beta (a measure of risk) of the security. I think for most hedge funds the amount of leverage varies wildly based on what's being traded, so it's tough to apply a single rule of thumb to an entire market.